Press Releases

RealNetworks Announces Third Quarter 2015 Results

- New Verizon collaboration brings RealTimes® to millions of mobile cloud subscribers;
- Casual Games business grows 15% sequentially, driven by Delicious™ franchise;
- Completed sale of Slingo and social casino games for $18 million;
- Significantly reducing operating expenses and cash burn; and
- Cash and short-term investments of $112.2 million

SEATTLE, Nov. 9, 2015 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the third quarter ended September 30, 2015.

For the third quarter of 2015, revenue was $30.8 million.  Excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015, revenue was $29.8 million, compared to $31.8 million in the previous quarter and $32.7 million in the third quarter of 2014.

"Our RealTimes go-to-market strategy to leverage mobile carriers and other partners is gaining traction," said Rob Glaser, Chairman and CEO of RealNetworks. "Our new collaboration with Verizon, the largest mobile service provider in North America, is a major step forward that will drive both revenue and distribution for RealTimes."

"At the same time, we're taking steps to cut costs and rebalance our resources to focus on our best and most leveraged opportunities. During the third quarter, we completed the sale of the Slingo and social casino games business. Last week, we implemented a plan to significantly reduce operating expenses and cash burn by moving off of legacy e-commerce platforms, and we're taking other steps to refocus the RealPlayer and RealTimes teams going forward."

"Additionally, we will continue to reinvest in our Casual Games business, which grew 15% sequentially, driven by the success of our Delicious franchise. We are also pleased with continued growth at the Rhapsody music service, in which we play a significant role and have a large ownership stake."

GAAP net loss for the third quarter of 2015 was $(21.2) million or $(0.59) per diluted share, compared to $(22.2) million or $(0.62) per diluted share in the third quarter of 2014. GAAP results for the third quarter of 2015 include $5.2 million severance, restructuring and lease exit charges related to the Company's ongoing cost reduction efforts.  Adjusted EBITDA for the third quarter of 2015 was a loss of $(12.2) million, compared to $(14.4) million for the third quarter of 2014. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of September 30, 2015, the company had $112.2 million in unrestricted cash, cash equivalents and short-term investments, comparable to its position as of June 30, 2015. During the third quarter, the Company received $10.0 million from the sale of the Slingo and social casino games business, with the remaining $8.0 million due in coming years.  The Company also received $5.2 million from Rhapsody for the full repayment of a loan, plus interest.

Business Outlook

For the fourth quarter of 2015, RealNetworks expects total revenue in the range of $26 million to $29 million and an adjusted EBITDA loss for the fourth quarter in the range of $(5.0) million to $(8.0) million.

Webcast and Conference Call Information

The company will host a conference call today to review results and discuss the company's performance at 5 p.m. ET/2 p.m. PT. You may join the conference call by calling 888-790-3440 or +1-517-308-9350 (Passcode: Third Quarter Earnings). A live webcast of the call will be available at http://investor.realnetworks.com/ and an on-demand webcast will be available approximately one hour following the conclusion of the conference call. A telephonic replay will be available until 11:59 p.m. PT, November 30, 2015 by calling 866-375-1051 or +1-203-369-0291 (Passcode: 1192015).

For More Information

Michael Newman, StreetConnect
Investor Relations for RealNetworks
+1-206-729-3625
IR@realnetworks.com

RNWK-F

About RealNetworks

RealNetworks creates innovative applications and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category in 1995 and continues to connect consumers with their digital media both directly and through partners, aiming to support every network, device, media type and social network. RealNetworks' corporate information is located at www.realnetworks.com/about-us.

RealNetworks and RealTimes are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered trademarks of their respective owners.

About Non-GAAP Financial Measures

To supplement RealNetworks' consolidated financial information presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA by reportable segment, which management believes provide investors with useful information.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP operating income (loss) to adjusted EBITDA and to adjusted EBITDA by reportable segment.

The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the quarterly earnings materials.  Please refer to Exhibit 99.2 ("Information Regarding Non-GAAP Financial Measures") to the company's report on Form 8-K, which is being submitted today to the SEC.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to RealNetworks' current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Rhapsody affiliate. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.  These statements reflect RealNetworks' expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: RealNetworks' ability to realize operating efficiencies, growth and other benefits from the implementation of its growth plan, strategic initiatives, and restructuring efforts; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the growth of competing technologies, products and services; the potential outcomes and effects of claims and legal proceedings on RealNetworks' business, prospects, financial condition or results of operations; risks associated with key customer or strategic relationships, business acquisitions and the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; fluctuations in foreign currencies; and changes in RealNetworks' effective tax rate. More information about potential risk factors that could affect RealNetworks' business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange Commission. The preparation of RealNetworks' financial statements and forward-looking financial guidance requires the company to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period.  Actual results may differ materially from these estimates under different assumptions or conditions. The company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)








Quarters Ended
September 30,


Nine Months Ended
September 30,






2015


2014


2015


2014



 (in thousands, except per share data)










 Net revenue


$

30,823



$

34,157



$

95,374



$

120,706


 Cost of revenue


18,090



18,928



54,469



58,500


 Extinguishment of liability








(10,580)


           Gross profit


12,733



15,229



40,905



72,786











 Operating expenses:









       Research and development


10,501



12,784



34,681



40,110


       Sales and marketing


11,938



13,283



38,822



51,022


       General and administrative


7,021



7,723



21,312



25,617


       Restructuring and other charges


3,114



2,048



5,563



3,805


       Lease exit and related charges


2,121



154



2,208



703











           Total operating expenses


34,695



35,992



102,586



121,257











 Operating income (loss)


(21,962)



(20,763)



(61,681)



(48,471)











 Other income (expenses):









       Interest income, net


147



80



597



396


       Gain (loss) on investments, net


(615)





(222)



2,371


       Equity in net loss of Rhapsody


(735)



(1,530)



(13,831)



(4,170)


       Other income (expense), net


297



325



628



153











           Total other income (expense), net


(906)



(1,125)



(12,828)



(1,250)











 Income (loss) before income taxes


(22,868)



(21,888)



(74,509)



(49,721)


 Income tax expense (benefit)


(1,684)



290



(1,075)



1,256











 Net income (loss)


$

(21,184)



$

(22,178)



$

(73,434)



$

(50,977)











 Basic net income (loss) per share


$

(0.59)



$

(0.62)



$

(2.03)



$

(1.42)


 Diluted net income (loss) per share


$

(0.59)



$

(0.62)



$

(2.03)



$

(1.42)











 Shares used to compute basic net income (loss) per share


36,191



36,003



36,134



35,912


 Shares used to compute diluted net income (loss) per share


36,191



36,003



36,134



35,912


 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)






September 30, 2015


December 31, 2014


(in thousands)

ASSETS






Current assets:






  Cash and cash equivalents

$

61,831


$

103,253

  Short-term investments

50,412


58,453

  Trade accounts receivable, net

20,534


15,257

  Deferred costs, current portion

324


702

  Deferred tax assets, current

640


652

  Prepaid expenses and other current assets

5,953


8,980

    Total current assets

139,694


187,297





Equipment, software, and leasehold improvements, at cost:




  Equipment and software

69,437


74,100

  Leasehold improvements

3,592


3,590

    Total equipment, software, and leasehold improvements

73,029


77,690

  Less accumulated depreciation and amortization

62,353


61,442

    Net equipment, software, and leasehold improvements

10,676


16,248





Restricted cash equivalents and investments

3,000


3,000

Investment in and advances to Rhapsody


10,000

Available for sale securities

1,756


2,676

Other assets

2,520


2,299

Deferred costs, non-current portion

145


316

Deferred tax assets, net, non-current portion

1,959


999

Other intangible assets, net

2,813


10,109

Goodwill

13,101


17,355





    Total assets

$

175,664


$

250,299





LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:




 Accounts payable

$

15,853


$

18,653

 Accrued and other current liabilities

23,890


25,286

 Deferred tax liabilities, net, current portion

1,602


1,628

 Deferred revenue, current portion

3,638


5,301

    Total current liabilities

44,983


50,868





 Deferred revenue, non-current portion

98


235

 Deferred rent

637


1,215

 Deferred tax liabilities, net, non-current portion

156


702

 Other long-term liabilities

2,228


81





    Total liabilities

48,102


53,101









Shareholders' equity

127,562


197,198





Total liabilities and shareholders' equity

$

175,664


$

250,299

 

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)








Nine Months Ended September 30,


2015


2014


(in thousands)

Cash flows from operating activities:






 Net income (loss)

$

(73,434)


$

(50,977)

 Adjustments to reconcile net income (loss) to net cash used in operating activities:






    Depreciation and amortization

7,952


8,876

    Stock-based compensation

3,761


4,158

    Extinguishment of liability


(10,580)

    Equity in net loss of Rhapsody

13,831


4,170

    Accrued loss (gain) on excess office facilities

2,208


480

    Deferred income taxes, net

(1,531)


(64)

    Loss (gain) on investments, net

222


(2,371)

    Realized translation gain

(264)


(48)

    Fair value of warrants, net of mark to market adjustments

(1,078)


    Net change in certain operating assets and liabilities

(7,636)


714

        Net cash provided by (used in) operating activities

(55,969)


(45,642)

 Cash flows from investing activities:




 Purchases of equipment, software, and leasehold improvements

(1,110)


(2,054)

 Proceeds from sale of available for sale securities

459


2,754

 Purchases of short-term investments

(52,475)


(63,574)

 Proceeds from sales and maturities of short-term investments

60,516


74,546

 Acquisitions, net of cash acquired

(161)


(733)

 Advance to Rhapsody

(5,000)


 Receipt of payment from Rhapsody

5,000


 Proceeds from the sale of Slingo and Social Casino business

10,000


 Other


(467)

       Net cash provided by (used in) investing activities

17,229


10,472

  Cash flows from financing activities:




 Proceeds from issuance of common stock (stock options and stock purchase plan)

297


641

 Tax payments from shares withheld upon vesting of restricted stock

(69)


(403)

 Payment of contingent consideration


(696)

       Net cash provided by (used in) financing activities

228


(458)

Effect of exchange rate changes on cash and cash equivalents

(2,910)


(1,534)

       Net increase (decrease) in cash and cash equivalents

(41,422)


(37,162)

Cash and cash equivalents, beginning of period

103,253


151,235

Cash and cash equivalents, end of period

$

61,831


$

114,073

 


RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)








2015


2014



 Q3


 Q2


Q1


 Q4


 Q3


 Q2


 Q1



 (in thousands)

Net Revenue by Line of Business














RealPlayer Group (A)


$

6,565



$

7,344



$

8,013



$

8,865



$

6,565



$

8,556



$

15,215


Mobile Entertainment (B)


16,414



18,515



14,480



17,616



19,190



23,182



19,913


Games (C)


7,844



8,095



8,104



9,025



8,402



9,087



10,596


     Total net revenue


$

30,823



$

33,954



$

30,597



$

35,506



$

34,157



$

40,825



$

45,724

















Net Revenue by Product















RealPlayer Group















- License (D)


$

3,628



$

4,208



$

4,672



$

4,496



$

3,255



$

3,273



$

5,018


- Subscriptions (E)


2,217



2,435



2,408



2,691



2,680



2,569



2,777


- Media Properties (F)


720



701



933



1,678



630



2,714



7,420

















Mobile Entertainment















- SaaS (G)


16,147



18,155



13,298



16,727



17,919



20,175



18,463


- Technology License & Other (H)


267



360



1,182



889



1,271



3,007



1,450

















Games















- License (I)


4,128



3,943



3,835



3,854



2,988



3,399



3,849


- Subscriptions (J)


3,231



3,373



3,570



3,947



4,320



4,440



5,241


- Media Properties (K)


485



779



699



1,224



1,094



1,248



1,506

















     Total net revenue


$

30,823



$

33,954



$

30,597



$

35,506



$

34,157



$

40,825



$

45,724

















Net Revenue by Geography















United States


$

11,460



$

12,303



$

12,349



$

13,860



$

12,280



$

15,092



$

20,428


Rest of world


19,363



21,651



18,248



21,646



21,877



25,733



25,296


     Total net revenue


$

30,823



$

33,954



$

30,597



$

35,506



$

34,157



$

40,825



$

45,724

















Net Revenue by Line of Business














(A) The RealPlayer Group primarily includes revenue from RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, and sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as RealPlayer Cloud, RealTimesTM, and SuperPass.

(B) The Mobile Entertainment division primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.

(C) The Games division primarily includes revenue from sales of games licenses, online games subscription services, advertising on games sites and social network sites, microtransactions from online and social games, and sales of mobile games.

Net Revenue by Product















(D) Licensing revenue within the RealPlayer Group includes sales of intellectual property licenses and RealPlayer Plus software licenses to consumers.

(E) Subscriptions revenue within the RealPlayer Group includes revenue from subscriptions such as our RealPlayer Cloud, RealTimes and SuperPass offerings.

(F) Media Properties revenue within the RealPlayer Group includes distribution of third-party software products and advertising on RealPlayer websites.

(G) SaaS revenue within Mobile Entertainment includes revenue from music on demand, ringback tones, intercarrier messaging services provided to network services providers who are largely mobile phone networks.

(H) Technology licensing and other revenue within Mobile Entertainment includes revenue from professional services provided to mobile carriers.

(I) Licensing revenue within Games includes retail games-related revenue and sales of mobile games.

(J) Subscriptions revenue within Games includes revenue from online games subscriptions as well as microtransactions from mobile and social games.

(K) Media Properties revenue within Games includes distribution of third-party software products and advertising on games sites and social network sites.

 

RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)













2015


2014


2015


2014



Q3


Q2


Q3


YTD


YTD



 (in thousands)

RealPlayer Group






















Net revenue


$

6,565



$

7,344



$

6,565



$

21,922



$

30,336


Cost of revenue


3,902



4,317



3,566



12,331



10,704


Gross profit


2,663



3,027



2,999



9,591



19,632













   Gross margin


41

%


41

%


46

%


44

%


65

%












Operating expenses


11,492



13,001



12,392



36,868



42,668


Operating income (loss)


$

(8,829)



$

(9,974)



$

(9,393)



$

(27,277)



$

(23,036)













  Adjusted EBITDA


$

(8,224)



$

(9,411)



$

(8,770)



$

(25,510)



$

(21,154)













Mobile Entertainment






















Net revenue


$

16,414



$

18,515



$

19,190



$

49,409



$

62,285


Cost of revenue


11,518



13,079



12,626



34,103



38,874


Gross profit


4,896



5,436



6,564



15,306



23,411













   Gross margin


30

%


29

%


34

%


31

%


38

%












Operating expenses


5,219



5,301



7,086



16,153



26,126


Operating income (loss)


$

(323)



$

135



$

(522)



$

(847)



$

(2,715)













  Adjusted EBITDA


$

473



$

1,013



$

447



$

1,711



$

916













Games






















Net revenue


$

7,844



$

8,095



$

8,402



$

24,043



$

28,085


Cost of revenue


2,513



2,286



2,573



7,593



8,419


Gross profit


5,331



5,809



5,829



16,450



19,666













   Gross margin


68

%


72

%


69

%


68

%


70

%












Operating expenses


6,431



8,719



8,658



23,833



27,193


Operating income (loss)


$

(1,100)



$

(2,910)



$

(2,829)



$

(7,383)



$

(7,527)













   Adjusted EBITDA


$

(716)



$

(2,354)



$

(2,246)



$

(5,853)



$

(5,718)













Corporate






















Net revenue


$



$



$



$



$


Cost of revenue


157



150



163



442



503


Extinguishment of liability










(10,580)


Gross profit


(157)



(150)



(163)



(442)



10,077













   Gross margin


N/A



N/A



 N/A



N/A



N/A













Operating expenses


11,553



7,808



7,856



25,732



25,270


Operating income (loss)


$

(11,710)



$

(7,958)



$

(8,019)



$

(26,174)



$

(15,193)













   Adjusted EBITDA


$

(3,727)



$

(4,449)



$

(3,788)



$

(11,917)



$

(15,400)













Total






















Net revenue


$

30,823



$

33,954



$

34,157



$

95,374



$

120,706


Cost of revenue


18,090



19,832



18,928



54,469



58,500


Extinguishment of liability










(10,580)


Gross profit


12,733



14,122



15,229



40,905



72,786













   Gross margin


41

%


42

%


45

%


43

%


60

%












Operating expenses


34,695



34,829



35,992



102,586



121,257


Operating income (loss)


$

(21,962)



$

(20,707)



$

(20,763)



$

(61,681)



$

(48,471)













   Adjusted EBITDA


$

(12,194)



$

(15,201)



$

(14,357)



$

(41,569)



$

(41,356)


 

RealNetworks, Inc. and Subsidiaries
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment
(Unaudited)








2015

2014

2015


2014


 Q3


 Q2


 Q3


 YTD


 YTD


 (in thousands)

RealPlayer Group




















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:

















Operating income (loss)

$

(8,829)



$

(9,974)



$

(9,393)



$

(27,277)



$

(23,036)


Acquisitions related intangible asset amortization

86



85



103



259



288


Depreciation and amortization

519



478



520



1,508



1,594


   Adjusted EBITDA

$

(8,224)



$

(9,411)



$

(8,770)



$

(25,510)



$

(21,154)












Mobile Entertainment




















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:

















Operating income (loss)

$

(323)



$

135



$

(522)



$

(847)



$

(2,715)


Acquisitions related intangible asset amortization

303



299



287



906



1,522


Depreciation and amortization

493



579



682



1,652



2,109


   Adjusted EBITDA

$

473



$

1,013



$

447



$

1,711



$

916












Games




















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:

















Operating income (loss)

$

(1,100)



$

(2,910)



$

(2,829)



$

(7,383)



$

(7,527)


Acquisitions related intangible asset amortization

170



312



314



775



942


Depreciation and amortization

214



244



269



755



867


   Adjusted EBITDA

$

(716)



$

(2,354)



$

(2,246)



$

(5,853)



$

(5,718)












Corporate




















Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by segment:

















Operating income (loss)

$

(11,710)



$

(7,958)



$

(8,019)



$

(26,174)



$

(15,193)


Other income (expense), net

297



(112)



325



628



153


Depreciation and amortization

1,273



394



556



2,097



1,554


Lease exit and related charges

2,121



9



154



2,208



703


Restructuring and other charges

3,114



1,964



2,048



5,563



3,805


Stock-based compensation

1,178



1,254



1,148



3,761



4,158


Extinguishment of liability









(10,580)


   Adjusted EBITDA

$

(3,727)



$

(4,449)



$

(3,788)



$

(11,917)



$

(15,400)












Total




















Reconciliation of GAAP operating income (loss) to adjusted EBITDA:

















Operating income (loss)

$

(21,962)



$

(20,707)



$

(20,763)



$

(61,681)



$

(48,471)


Other income (expense), net

297



(112)



325



628



153


Acquisitions related intangible asset amortization

559



696



704



1,940



2,752


Depreciation and amortization

2,499



1,695



2,027



6,012



6,124


Lease exit and related charges

2,121



9



154



2,208



703


Restructuring and other charges

3,114



1,964



2,048



5,563



3,805


Stock-based compensation

1,178



1,254



1,148



3,761



4,158


Extinguishment of liability









(10,580)


   Adjusted EBITDA

$

(12,194)



$

(15,201)



$

(14,357)



$

(41,569)



$

(41,356)


 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-third-quarter-2015-results-300175115.html

SOURCE RealNetworks, Inc.

News Provided by Acquire Media

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